No News would be good news

SURELY it is time that News Corp shares were hoofed out of the ASX 200 index, or at least quarantined from the rest of the market. The alternative is to continue churning out virtually meaningless daily share indices.

News Corp is essentially an American company. The bulk of its assets are in the US and most of its revenue comes in greenbacks. The shares are traded in the US in ADR form, and it is Wall Street analysts who can make or break their price.

Even in its slimmed down shape, News Corp is valued at over A$70 billion on the Australian market. The group accounts for a whopping 12 per cent of the stock index.

In the first half of this year that flattered the broad market, when institutional investors were fighting each other to pay up to $28 for News Corp to get their correct index “weighting”. But that was then. Since the end of September, News Corp shares have rolled around like a drunken sailor on their way to $18.

The sharpest gyrations occurred in mid-November when the powerful US media analyst Jessica Cohen clipped her recommendation on the stock from “buy” to “neutral” following the disappointing first quarter results. During the next three sessions the Australian All Ordinaries index dived over 63 points – without NewsCorp the index would have been up nine points. Over a six week period, the near 30 per cent drop in Rupert Murdoch’s flagship company has carved about 170 points off the index, almost completely masking a strong performance by the other leading shares.

Of course the company could not be removed from the index. But when you ask share traders how the market is doing, the savvy ones will give you a reply “ex-News” Perhaps we should all adopt that.